Monday, 13 May 2013

Harsh financial truths about architecture

Last week The Architects' Journal published the AJ100, its annual survey of the UK's biggest practices. Much of it is a celebration of success, with awards, new entrants and even the respondents feeling reasonably upbeat about the future. But it also contains some sobering truths.
I found the most sobering aspect to be the table that showed the architectural fees delivered out of UK offices per member of architectural staff.
At the top was Populous with a very respectable £271,000 per architect. Foster and Partners, which everybody sees as a high earner, was in fourth place at only £171,000 per head but one must remember that much the work delivered out of the UK is built overseas and so was not eligible. What was really worrying was the bottom end, with several practices reporting earnings of less than £60,000 per architect, and the lowest, Reiach and Hall, scoring only £50,000. What makes this really disturbing is that, while Reiach and Hall has 21 architects, it employs a total of 37 staff - a fairly average ratio. So the fee earnings per member of staff are just over £28,000 per staff member - a figure that is certainly not sustainable, given that accommodation, tax, national insurance, computers etc all have to be paid for.
If this were a one-off it could be seen as a criticism of an individual practice and of bad management. But the other low-earning practices are in a similarly difficult position - and these are the UK's biggest practices and, by some measure at least, the most successful.
If you want an indication of just how quickly things can go wrong, then read BD's interview with Ian Simpson. His is a practice that was seen as, and really was, hugely successful. Yet the interview is headlined 'How I lost millions in unpaid fees'. Simpson describes how his world 'caved in' in one week in summer 2008, as he was, ironically, celebrating the practice's success. Jobs just stopped and on some he never saw the fees again.
He survived by cutting fees to the bone. 'We didn’t want to be discarded because we were too expensive so we always do a really detailed analysis of time and resources so we can determine where the money’s going,' he said.' I even know what we spend on pencils,'
These are hard times, and it is not surprising that we are seeing a rash of business failures. It is heartening though that Simpson, back on his feet, is now helping another practice that ran into trouble.